Engine plant under cloud

Holden's local engine factory could be closed by 2020.
Photo: Craig Abraham

Holden boss concedes Port Melbourne engine plant could close by end of the decade.

Holden's $400 million Port Melbourne engine plant could shut by the end of the decade.

A push for fuel efficiency and the high Australian dollar have cast a cloud over the future of the plant that exports more than 50,000 engines annually and supplies the locally-produced Commodore.

Holden chairman and managing director Mike Devereux admits that while no decision had been made, the V6 engine plant could shut by the end of the decade.

"We would definitely be talking to both the Victorian Government and the Federal Government - and have been - about the future of the engine plant," said Devereux. "We have decisions to make."

Devereux said a big investment is required to reconfigure the plant for more fuel efficient four-cylinder engines.

"You would need to retool that engine plant almost fully to be able to build something other than that V6," he said. "A significant amount of capital investment would be required to upgrade that engine plant."

It was only a decade ago that Holden opened the new plant and began exporting to brands as diverse as Alfa Romeo and Saab.

The same engine family is produced in Ontario, Canada.

Any move to shut the plant could threaten up to 400 jobs, adding pressure to an already distressed local manufacturing industry that has seen thousands of jobs lost as Holden, Ford and Toyota trim their local operations and respond to waning large car demand and cheaper imports. Holden is currently crunching the numbers on the plant, which is building V6 engines that are becoming increasingly less relevant as car makers down size and switch to four-cylinder propulsion.

Holden recently committed to spending more than $1 billion in return for $275 million in taxpayer funding to guarantee local vehicle production until at least 2022.

However Devereux says the guarantees relating to local investment do not relate to the engine plant.

"The vehicle building and the engine plant are completely disconnected from the decision on architecture (future models to be produced)," he said. "The engine plant is not part of the contract we signed (with the Federal Government)." Devereux indicated Holden would be expecting additional taxpayer funding for the engine plant to continue long term. "We'll need to have a business plan for that plant."

However, he said the plant will operate until at least 2017, when production of the soon-to-be-updated VF Commodore is expected to end.

"We have a very full production plan for the life of that engine we are going to be building a lot of those V6s, said Devereux. "We have some time to think about it."